Truth is the first victim of war. As the global response to the coronavirus pandemic has the makings of a war, there are questions if electronics manufacturing in China is actually returning to higher levels after weeks of disruption.
Workers in China and Taiwan affected by the virus have not returned to their jobs at chip and components factories at nearly the levels that Chinese officials have reported, according to analysts who study production levels in China and spoke to FierceElectronics.
The supply chain dilemma has already taken a toll on device makers like Apple, which on Friday announced it would be closing all its retail stores outside of Greater China until March 27. However, the company in its message signed by CEO Tim Cook said that Apple stores in China had reopened on Friday. That mixed message implies that Apple has had trouble shipping products outside of China or could only make enough of them for China’s consumption, analysts said.
The message for other electronics and device makers is indeed mixed overall, and contradictions abound. However, dire reports have surfaced in recent days.
One industry official who works with a team of supply chain analysts in Asia told FierceElectronics on Monday that electronics device makers in China and Taiwan are still facing difficult shortages primarily because many workers haven’t yet come back to work. The official said capacity of many factories is not higher than 30% of normal output. Ramp-up operations are going “very slowly,” added the official, who asked not to be identified to protect his own sources.
Analysts at Resilinc, a supply chain research firm, said that more that 3,500 factories owned by large companies make semiconductors and consumer electronics that are located in coronavirus-affected areas of the world.
Concerns about the supply chain and production levels are also bolstered by negative sales and supply data.
VLSI, an analytics firm that studies semiconductor sales and supplies, reported that the global unit supply of semis for the first week of March were down by 19% over their five-year average, with sales down by 18%.
Vitaliy Kin, a senior analyst at investment firm Exante, said it is entirely possible that a factory in China could be operating at only 20%, even though government officials in China might put the highest rate at 80%. If a production line has four major sections, with one as high as 80% and another as low at 20%, the production rate needs to be calculated by the lowest rate of 20% since only 20% of production can be completed.
Kin also said there are concerns in Hong Kong that a second round of coronavirus could hit China after numbers of infected people started leveling off in the Wuhan area of China, the original source of the disease.
“A lot of cities in China are still in lockdown or partially shut down,” Kin said. “People are still unable to work and some do not want to go back due to the perceived high risk.” Reports that 80% of the Chinese workforce have returned to work are “questionable, “Kin said.
The global caseload of coronavirus passed 169,000 on Monday with more than 6,500 deaths. The human disaster has been matched with economic turmoil. In the U.S., stock markets reeled again Monday, one day after the Federal Reserve cut interest rates to zero.